China–Gulf Energy Relations

, a publication by the Woodrow Wilson International Center for Scholars.

Introduction:

Energy, especially oil, lies at the heart of China’s relationships with Persian Gulf countries. As China’s oil demand and imports have grown, so have China’s trade and investment ties with the states of the Persian Gulf. However, the nature of China’s energy relationships with major powers in the region varies dramatically. While Chinese officials and oil executives regard Saudi Arabia as a very reliable oil supplier and Iraq as a land of tremendous upstream opportunities, Iran is viewed as a tempting but tough place to do business. The new unilateral international sanctions imposed on Iran by the United States, the European Union, and other countries are likely to reinforce these perceptions.

Saudi Arabia: A Very Reliable Partner

China regards Saudi Arabia as a very reliable supplier of crude oil. Over the past decade, the Saudis have repeatedly told the Chinese that they can count on Saudi Arabia to provide China with the oil it needs for continued economic growth. They have also matched their words with deeds. Saudi Arabia has been China’s largest supplier of crude oil since 2002, providing China with one-fifth of its crude oil imports in 2009.

Perhaps the greatest reassurance the Chinese have received from the Saudis about their reliability as an oil supplier came during President Hu Jintao’s state visit in February 2009. While Hu was in Riyadh, the Saudis promised to guarantee the supply of crude oil to China at all times as part of a “gentleman’s agreement” between Saudi Aramco and China Petrochemical Corporation (Sinopec). Nine months later, Ali Al-Naimi, Saudi Arabia’s Minister of Petroleum and Mineral Resources repeated this pledge in Beijing in his acceptance speech for the honorary doctoral degree awarded to him by Peking University. Speaking about Saudi Arabia’s commitment to global market stability and supply continuity and reliability, he said, “let me be as explicit as possible: China can rely on Saudi Arabia to provide it with the oil it will need to continue its projected growth for the coming decades.”